LexisNexis(TM) Academic - Document

LexisNexis(TM) Academic - DocumentCopyright 2005 The Financial Times Limited
Financial Times (London, England)

March 17, 2005 Thursday
London Edition 1

SECTION: COMPANIES INTERNATIONAL; Pg. 49

LENGTH: 382 words

HEADLINE: WTO rejects EU claims on creditor bail-out of Hynix SEMICONDUCTORS:

BYLINE: By JUNG-A SONG

DATELINE: SEOUL

BODY:


The World Trade Organisation has rejected claims by the European Union that Hynix Semiconductor, the world's second-largest memory chipmaker, was being illegally subsidised by the South Korean government.

In its confidential interim ruling on the issue, the WTO upheld a complaint from South Korea that Hynix was being unfairly penalised by EU tariffs, people close to the matter said yesterday.

"The ruling says the creditor bail-out of Hynix does not constitute state subsidies," one person close to the situation said.

It is the second victory for South Korea in its trade disputes with Europe, following last week's WTO ruling against another EU claim that Seoul was unfairly subsidising its shipbuilding industry. If the report is confirmed in a final ruling expected in a month, it will remove a big headache for Hynix, and allow it to focus on enhancing profitability. It teetered on the edge of bankruptcy in 2001, and has been saved by controversial multi- billion-dollar bail-outs from state-backed banks.

It returned to profit last year and was able to avoid the EU tariffs by diverting production to its Oregon plant in the US.

In 2003, the EU imposed anti-dumping duties of 34.8 per cent on Hynix's memory chips made in Korea, following complaints by German chipmaker Infineon Technologies that Hynix was responsible for an oversupply of D-Ram chips in Europe.

But the WTO panel said the EU failed to prove that Hynix received unfair state subsidies. The EU has to respond within 30 days to the interim ruling, after which the WTO is expected to issue a final decision.

Both sides can then appeal. Last month, the WTO upheld a similar complaint by South Korea against US countervailing duties of 44 per cent on Hynix chips, saying the US had not presented convincing evidence to support its claim that Seoul directed banks to make loans to the troubled company.

The US appealed against the ruling. Analysts said the latest WTO report might affect Japan's ongoing investigation into allegations that Hynix received state aid.

The Japanese government is to decide whether to take action against the Korean chipmaker, after Japan's Elpida and US-owned Micron Japan asked Tokyo last year to impose punitive tariffs on D-Rams made by Hynix, claiming the imports were hurting the Japanese industry.

LOAD-DATE: March 16, 2005